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LONDON, ENGLAND—In recent decades, the King’s Cross neighborhood in central London was known as one of the city’s sketchiest areas: full of prostitutes, drug dealers, and other seedy elements. These days, the former railyard site—just steps from one of London’s major local, national, and international transit hubs—is rapidly being transformed into a major mixed-use commercial, residential, and academic zone.

At the moment, King’s Cross is part arts university, part construction site, part modern flats, and a handful of street food vendors—gourmet ham sandwiches and high-end coffee—lining the single exposed footpath. But just a few weeks ago, Google dropped over $1 billion to purchase 2.4 acres of land and develop a million square feet at office space at King’s Cross Central.

"[10 years ago], you would not leave a dog tied to a lamppost [in King’s Cross],” said Richard Howard, the senior director at DTZ, whose firm worked on brokering a deal with Google. (Last year, Condé Nast Travellerproclaimed it as London’s “hottest neighbourhood.”)

He says he’s been very busy since the Google deal closed. "The phone's been ringing for awhile now,” he added.

Enlarge/ For now the King's Boulevard is lined with a few street vendors, but those faux-ivy green plywood walls hide an active construction site.

According to local industry observers and commercial real estate developers, this huge purchase is setting the tone for the increasing important tech sector in London as American tech companies like Amazon, Salesforce, Microsoft, Facebook, Twitter, and others are actively looking for significant properties in the city center. Even Yelp, which is largely unknown in Europe, just signed its first lease on a small office on Baker Street in 2012.

Among commercial land deals, this huge growth in the technology, media, and telecommunications sector (known in local industry jargon as “TMT”) appears to be driving new kinds of mixed-use office space—an early indication that London’s real estate and financial sectors could be banking, literally, on the expansion and investment of big tech companies in the United Kingdom and continental Europe.

“35 percent of all [commercial real estate] demand in central London is TMT,” Howard added.

Would a Silicon Roundabout by any other name smell as sweet?

Once Google’s site is completed in 2016, the million-square-foot office will house several thousand employees and will be twice as big (as measured by workspace square footage) than Google’s home headquarters in Mountain View, California, known as the Googleplex. According to the search giant, the land deal makes it “one of the biggest ever commercial acquisitions in the UK.”

London has been a major financial hub for centuries, and its last major commercial development was propagated by international banks at the eastern edge of the city, in a former docklands area known as Canary Wharf. That collection of high-rise office complexes has about as much personality as a San Francisco skyscraper—with HSBC ATMs and a Starbucks in the lobby. While that might work for Goldman Sachs, developers say that doesn’t work for the likes of wannabe Googles, ideally replete with bike parking, child care, organic lunches, and the like. In short, like tech hipsters everywhere, startups want to put fun into function.

"[A built-in] Whole Foods is the dream for all these guys,” Hannah Fearnley, a national director at commercial real estate firm Jones Lang LaSalle, told Ars. The high-end American grocery chain opened its first European store in London in 2007, with its second store opening its doors in 2012.

Fearnley's firm is actively beginning work on renovating a large L-shaped building (207-211 Old St.) with 500,000 square feet of office space right on “Silicon Roundabout,” as the Old St. roundabout is becoming known. This high-rise tower is adjacent to public housing, but immediately adjacent to a popular café, the Shoreditch Grind, which feels similar to any buzzing, tech-friendly Wi-Fi café in any city in the world.

In recent years, London’s tech scene has been largely confined to a handful of spaces clustered around the roundabout, a small corridor of 1970s-era buildings that house startups just 1.6 miles away from King’s Cross. Many of those companies are still fairly small: Last.fm, Moo, Dopplr, and others. The Roundabout already has one high-tech corporate anchor, the satellite communications firm Inmarsat.

“The Government can’t control and doesn’t know how to communicate with companies that are succeeding,” wrote Milo Yiannopoulos in December 2012. He’s the editor-in-chief of The Kernel, a UK-based online tech magazine.

“But, for the other 95 per cent, the quangocrats are swooping in and taking ownership. And we know where this story ends: ballooning numbers, mediocrity, failure, and colossal expense. What was previously grumbling from the fringes about the Government wading in and interfering in the sector, claiming credit not due to it and trying to take over what is happening in spite of and not because of [the Government’s] presence in east London is now represented in a generational flow of wealth through public sector VC firms and, now, urban regeneration: the latest, most expensive, and most manipulative kind of engineering the Government has yet applied to the area.”

Enlarge/ The technology, media, and telecommunications (TMT) sectors are driving huge demand in London real estate.

An eye towards young startups

For now, TechHub, one of Europe’s pre-eminent co-working spaces, has its flagship office a stone’s throw from the roundabout. A quick walk around the neighborhood suggests though, that it could do with a little sprucing up beyond its 1970s-era offices—many signs in the area indicate that there’s plenty of available space. Other trendy and prominent TMT sites include the nearby Tea Building and the Zetland House.

A Jones Lang LaSalle brochure indicates that it’s common knowledge in the London commercial real estate world that Amazon “has a requirement” for 300,000 to 600,000 square feet of new space by 2016—consolidating its existing London-area offices to the center. Microsoft, meanwhile, is looking to open another office with 150,000 square feet by 2014, and Sony, anywhere from 60,000 to 250,000 square feet by 2015. Major advertising firms, including Havas and Omnicom are also looking for at least 100,000 square feet each by 2015. Developers and realtors even have their eyes on smaller London-based startups, including Firebox, PeerIndex, and FundApps.

Meanwhile, Howard says that he’s already started checking out Bay Area startups that may perhaps one day want to expand to the UK and the rest of Europe.

"I read the San Francisco Chronicle, that’s more useful to spot the trends,” he said, adding that he encourages his younger colleagues to be aware of up-and-coming firms, even if it means only selling or leasing them a small property.

He said he even shows the now-famous photo of Microsoft (back in 1978)—asking his colleagues if they would rent to this hippie-looking group. When they invariably say no, Howard chastises them: “You’ve just turned away Microsoft, before they got huge.”

Promoted Comments

I'm guessing London is attractive because tech-hipsters care about culture more than living costs.

Cambridge has really good tech-park business estates, but it's also super-expensive to live in and doesn't have the cultural diversity of London.

The London suburban towns have no culture, because it's all been sucked away into London. Transport is often bad, since it's designed to get middle-aged dads from their family homes to their jobs in the city. It's not designed to get anywhere else (and to get somewhere else you often have to go to London first, then get a connecting train/plane or else get stuck on the M25 in your car.

The provincial cities have culture but don't always have the awesome 4G/LTE/fiber connectivity that telecoms/IT startups will want. Americans may also need translators for the broad accents. However, they do make a lot of sense for a startup that doesn't want to pay London wages or live in a wardrobe-sized apartment. I think Manchest/Leeds/Sheffield/Liverpool are all trying to get in on the action in the tech sector.

I think you hit the nail in the head there. London can hardly be called an English city - it looks and feels nothing like anything else throughout the UK. It's cosmopolitan and multicultural, and full of action.

Tech companies, and any other business, for that matter, don't just look for the cheapest place to live. All businesses need employees, and part of making yourself attractive to a prospective employee as a business is being able to offer a good life outside the office.

Which would be more attractive as a job offer: working for a hot tech start-up with a Birmingham office, or working for a hot tech start-up with a London office?

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Cyrus Farivar
Cyrus is a Senior Tech Policy Reporter at Ars Technica, and is also a radio producer and author. His latest book, Habeas Data, about the legal cases over the last 50 years that have had an outsized impact on surveillance and privacy law in America, is out now from Melville House. He is based in Oakland, California. Emailcyrus.farivar@arstechnica.com//Twitter@cfarivar